Addressing Health Care Market Consolidation and High Prices: The Role of the States

Abstract

States have adopted numerous initiatives to address failed competition and high health care prices in provider markets. In this report, we provide a survey of these activities and provide detail on how these and other possible initiatives can address market consolidation both by creative approaches to insert more competition into health care markets and, where market failure seems inevitable, pragmatic regulatory approaches, particularly to limit prices that hospitals and physicians are able to command. We will argue that in important ways, certain approaches to regulating prices actually promotes better-functioning, more competitive markets. We explore in depth the changing role of state attorneys general in addressing high and varying prices, the trade-offs between preventing or limiting mergers versus attempting to restrict the conduct that merged provider systems typically engage in, whether certificate of need laws actually compromise market competition as commonly assumed, and, finally, a range of approaches states can take to regulate payment rates while mounting initiatives to promote more provider competition in health care markets.

Note: Funding: This report was funded by the Commonwealth Fund.

Declaration of Interests: None to declare.

Keywords: healthcare prices, competition, healthcare markets, market consolidation, anti-trust, price transparency,

JEL Classification: I00, I1, I10, I11, I15, I18, H75, P46